Corporate Disclosure Practices, Institutional Investors, and Stock Return Volatility
Posted: 23 Feb 2001
Date Written: September 2000
Abstract
This paper investigates whether a firm's disclosure practices affect the composition of its institutional investor ownership and, hence, its stock return volatility. The findings indicate that firms with higher AIMR disclosure rankings have greater institutional ownership, but the particular types of institutional investors attracted to greater disclosure have no net impact on return volatility. However, yearly improvements in disclosure rankings are associated with increases in ownership primarily by "transient" institutions, which are characterized by aggressive trading based on short-term strategies. Firms with disclosure ranking improvements resulting in higher transient ownership are found to experience subsequent increases in stock return volatility.
Keywords: Corporate disclosure; Institutional investors; Stock Return Volatility
JEL Classification: M41, M45, G12, G32, G39
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